Dubai: Standard & Poor's, a leading global index provider and Hawkamah, the Institute for Corporate Governance, announced on Tuesday a partnership to create a series of environmental corporate governance and sustainability indices for equity markets in the Middle East and North Africa (Mena).
The S&P-Hawkamah environment, sustainability and governance (ESG) Mena indices are expected to include stocks from 11 markets initially and will raise the profile of local companies that perform well along the three parameters of environmental, social and corporate governance responsibility when compared to their peers.
The development of the indices will be modelled on the S&P ESG India index, a project originated last year by Standard & Poor's, Crisil and KLD Research and Analytics, with partial financial support of the International Finance Corporation (IFC), a member of the World Bank Group.
Focus
The S&P-Hawkamah ESG Mena indices will focus on the best-performing stocks as measured by their level of concern for the interests of both internal and external stakeholders - shareholders, employees, customers, the larger community within which they operate and, most importantly, the environment. The indices will employ a unique and innovative methodology that quantifies a company's ESG practices and translates them into a scoring system, which is used to rank each company against their peers in Mena markets.
"Advancing corporate governance and sustainability parameters in the region requires a multi-faceted approach where we recognise that each of the Mena countries has reached variable phases. Our aim is to raise the bar for corporate performance on major issues for the region including the environment, social and corporate governance responsibility," said Dr Nasser Saidi, executive director of Hawkamah.
S&P ESG indices represent the first of their kind in the Mena region, employing a unique methodology that quantifies a company's ESG practices and translates them into a scoring system, which is then used to rank each company against their peers. This will provide investors with objective insight to incorporate sustainability measures into their investment decisions.
A joint S&P and Hawkamah taskforce will be formed to develop the framework for the indices, expected over the next 12 months.
"The S&P ESG methodology uses the scores that companies received on ESG parameters as index constituent weights," said Robert Shakotko, managing director of index services, Standard & Poor's. "This ensures that performance is based on a company's investment in ESG parameters rather than its sheer market size. In this new project for the Mena markets, we will tailor our approach far more precisely to the prevailing disclosure and reporting standards in each local market through Hawkamah's expertise."
